The Year to Come and Year in Review summarise a selection of major developments you should be aware of from 2021, and a selection of key developments expected in 2022.
Updates in
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key areas in 2021 and 2022
“In 2021 we have assisted to important developments in a number of different fields, including capital markets, corporate, competition and antitrust, employment, financial regulation, tax and also real estate, a practice now covered by our Italian offices. These set the tone also for what is expected to come in 2022. Our overview tackles these relevant developments and what we can expect for 2022.”
Lucio D’Amario, Partner, Partner K&L
New EU framework on Crowdfunding Services: The draft European Delegation Law 2021 has mandated the Italian Government to align domestic legislation with Regulation (EU) 2020/1503 on crowdfunding service providers (CSPs), as well as to transpose Directive (EU) 2020/1504 (which amends MiFID II on the topic of crowdfunding). In particular, the Crowdfunding Regulation establishes a harmonised legal framework for CSPs operating a public digital platform. This aims to facilitate the matching of prospective investors or lenders with businesses (the “project owners”) that seek funding by way of loans (lending-based crowdfunding) or acquisition of transferable securities (investment-based crowdfunding).
Transposition of the Shareholders Rights Directive: Legislative Decrees no. 49 of 10 May 2019 and no. 84 of 14 July 2020 implemented Directive (EU) 2017/828 (SHRD II). At secondary law level, in 2019 and 2020 both CONSOB and the Bank of Italy launched consultations on proposed changes to their existing rules. The provisions regarding remuneration transparency, asset managers and shareholders’ activism, contained in the CONSOB consultation, were implemented in December 2020. The CONSOB and Bank of Italy consultation on shareholders’ identification, transmission of information and exercise of rights of listed companies’ shareholders will be finalised in 2022.
Cross Border Conversions, Mergers and Demergers: According to the draft European Delegation Law 2021, by 31 January 2023 the Government shall transpose Directive 2019/2121, amending Directive (EU) 2017/1132 as regards cross-border transformations, mergers, and divisions. It updates the existing conditions and provisions for cross-border mergers within the EU and introduces new provisions on cross-border conversions and divisions for limited liability companies. They include the possibility of speeding up the procedure by waiving reports for shareholders and employees in certain circumstances; grant more safeguards to creditors and stakeholders; and introduce a system of prior consent by a competent national authority and an anti-abuse check. Consequently, the main benefit of the Directive is that it provides for a largely identical process for the three cross-border operations throughout the EU.
Transposition of the ‘Omnibus Directive’: The draft European Delegation Law 2021 sets out the principles and criteria for the transposition of Directive (EU) 2019/2161 on better enforcement and modernisation of EU consumer protection rules (the Enforcement and Modernisation Directive, also known as the “Omnibus Directive”). It aims to strengthen consumer rights through enhanced transparency and enforcement measures and will update consumer protection directives: 93/13/EEC (Unfair Contract Terms Directive); 98/6/EC (Price Indication Directive); 2005/29/EC (Unfair Commercial Practices Directive); and 2011/83/EU (Consumer Rights Directive).
Reform of public procurement regulation: The Parliament is setting out the criteria that the Government shall follow when reforming the existing legislation on public contracts, currently set out in the Public Procurement Code. The amendments are expected to consolidate the regulatory framework and to speed up the public tender procedure by simplifying and digitalising the processes. The approval of the delegation law is expected in the next few months and the new Public Procurement Code within the following six months.
National Code of Equal Opportunities – stop gender pay gap: With Law no. 162 of 5 November 2021, the Italian Parliament approved a gender wage parity package. The very ambitious provision addresses many different concerns: from the purely economic (i.e., equal pay for equal work), to gender inequalities and maternity protection. The main measures include: (i) the introduction of the certification of gender equality, which aims at certifying the measures taken by employers to reduce the gender gap; (ii) the provision of economic bonuses for the “virtuous” employer; (iii) the introduction of the obligation for public and private companies with more than 50 employees (threshold was previously 100) to draw up a biannual report on gender diversity.
Transposition of Whistleblowing Directive: The European Delegation Law 2019-2020 delegates the Government to transpose, by 17 December 2021, Directive (EU) 2019/1937 (Whistleblower Directive). The scope of this Directive is to ensure a high level of protection for persons reporting EU law violations in areas such as public procurement, financial services, products and markets, prevention of money laundering and terrorist financing, environmental protection and consumer protection. The directive provides a very broad definition of a whistleblower, corresponding to a heterogeneous category of persons working both in the public and private sectors. These include employees and self-employed persons, shareholders, facilitators, volunteers, trainees, colleagues and relatives of the whistleblower. More specifically, their protection is strengthened by introducing effective, confidential and secure reporting channels, as well as ensuring effective protection from retaliation.
Measures to support employment: The draft 2022 Budget Law introduces several measures to support employment. More specifically, (i) it implements the reform of social safety nets; (ii) it provides incentives for the use of solidarity contracts; (iii) it extends the so called “expansion contracts” to all the companies which employ more than 50 workers to 2023. Retirement provisions aim to ensure greater flexibility and turnover of workers. Firstly, “Quota 100” will be substituted by “Quota 102”. This makes it possible to retire at 64 with 38 years of paid contributions. Furthermore, both the so- called “Opzione Donna” (an early retirement pension provided by the State to which female workers who meet specific requirements have access) and the State-funded pension advance (so-called “APE sociale”) will be extended and enlarged to heavy manual workers.
Transposition of MiFID II Quick-fix Directive: According to the draft European Delegation Law 2021, the Government shall transpose Directive 2021/338 (MiFID II Quick-fix Directive, adopted in the context of the Capital Markets Recovery Package as a response to Covid-19). The Directive aims to reduce the regulatory complexity and compliance costs of investment services as well as to eliminate distortions of competition, without compromising investor protection. The most important changes concern: the organisational requirements for investment service providers combined with exceptions to product governance requirements; information requirements and transparency; the conditions under which investment firms can pay jointly for research and execution services; the new criteria based on which a trading activity is considered ancillary to the main business; and possession of a commodity derivatives regime.
New rules on venture capital and social entrepreneurship funds: Under Law no. 53 of 22 April 2021 (“European Delegation Law 2019-2020), the Government was required to align existing legislation with Regulation (EU) 2017/1991, which amended the EU Regulations on Venture Capital Funds (EuVECA) and Social Entrepreneurship Funds (EuSEF). The updated regulations: widen the range of managers eligible to manage and distribute EuVECA and EuSEF; expand the ability of EuVECA to invest in unlisted companies with up to 499 employees or small and medium-sized guaranteeing a turnaround time of two months for new manager registrations; determine the minimum capital necessary to become a manager; and ensure that ESMA’s central database includes information concerning all EuVECA and EuSEF managers and their funds.
Implementation of the Pan-European Personal Pension (PEPP) Regulation: The European Delegation Law 2019-2020 sets out the principles and criteria to be followed by the Government when implementing the Regulation (EU) 2019/1238 on the pan-European personal pension product (“PEPP Regulation”). The PEPP is a voluntary personal pension scheme that will complement existing public and occupational pension systems, as well as national private pension schemes. With the new regulation, PEPP providers will benefit from a true single market for personal pensions and from facilitated cross-border distribution, including an EU passport. The regulation ensures standardisation of the core product features, such as: transparency requirements, investment rules and switching rights and type of investment options. Thanks to the standardisation of these core PEPP features, providers will also be able to sell PEPPs online and to distribute them in several Member States with one single product registration.
Implementation of the Securitisation Regulation: In the European Delegation Law 2019-2020, the Government was mandated to adapt the existing legislation to the provisions of Regulation (EU) 2017/2402. This establishes a general framework for securitisation and a specific framework for simple, transparent, and standardised securitisations (STS Regulation). The STS Regulation also changes some matters relating to securitisations that are already subject to EU regulation. These include the need for the investor to carry out due diligence activities, or the need to maintain a net economic interest in the securitisation (“the risk retention rule”).
Transposition of the EU Restructuring and Insolvency Directive:
The European Delegation Law 2019-2020 has mandated the Government to transpose Directive 2019/1023 (Restructuring Directive). The deadline is now 17 July 2022 after the Government asked for a one-year extension to transpose. The Restructuring Directive provides a regulatory framework for all Member States that is favourable to the recovery of companies in crisis and that guarantees the rights of both creditors and debtors. There are three core elements: 1) preventive restructuring through rules on alerts, facilitation of negotiations, planning process, protection of restructuring financing and operations and, finally, obligations of managers; 2) exoneration and 3) measures for the efficiency of procedures. The overall objective is to reduce the most significant barriers to the free flow of capital stemming from differences in Member States’ frameworks, and to enhance the rescue culture in the EU based on the principle of second chance. The rules also aim to reduce the amount of NPLs on banks' balance sheets and to prevent their accumulation in the future.
Changes to the rules on the tax step-up:
The draft 2022 Budget Law amends, for the worse, the rules on tax step-up introduced by Law Decree no. 34 of 19 May 2020 (converted into Law 77/2020, “Decreto Rilancio”). Under the Decree, companies were allowed to step their assets for tax purposes by paying a 3% tax. This measure was originally introduced to provide tax relief to companies struggling due to Covid-19. Now, under the draft 2022 Budget Law, those companies that opted for the tax step-up of intangible assets will have to deduct the depreciation on the stepped-up intangibles over a 50-year period as opposed to an 18-year period. Alternatively, the draft 2022 Budget Law allows a company to either waive the tax step-up, or to restore the 18-year depreciation period (as opposed to the new 50-year period) by paying an additional tax (12% up to EUR 5m of higher values, 14% between EUR 5m and 10m, and 16% above EUR 10m) to be calculated net of the 3% tax already paid. The amendment operates retroactively, in express derogation from the Taxpayer's Statute.
Annual Competition Law 2021: The annual competition law 2021, which is currently under examination, removes barriers to market entry in various areas. These include the concession regimes of public goods, local public services and transport, energy and environmental sustainability, health protection, the development of digital infrastructures and telecommunication services as well as on the removal of burdens and equal treatment between economic operators in the interactions with the Public Administration. The bill aims at: (i) promoting competition by facilitating market entry by smaller companies; (ii) removing regulatory obstacles to the opening up of markets; and (iii) ensuring consumer protection. The bill contains a specific section dedicated to the strengthening of the enforcement powers of the Italian Competition Authority (AGCM). Firstly, some of the investigative powers of the AGCM have been extended, including those in the pre-trial phase. Secondly, the AGCM is given the power to call-in concentrations below thresholds when certain conditions are met, including the existence of concrete risks for competition in the market. The call-in power can be exercised up to six months after the transaction has been completed. Thirdly, the substantive test to assess mergers has been aligned to the “significant impediment of effective competition” test (SIEC test) under the EU Merger Regulation. Fourthly, the method of calculation of turnover of financial institutions and principles concerning full-function joint ventures, have been aligned to EU law. Fifthly, a settlement procedure for infringement proceedings has been introduced. Finally, the powers to sanction abuse of economic dependency have been strengthened.
Transposition of the ECN+ Directive: Legislative decree no. 185 of 8 November 2021 has transposed Directive (EU) 2019/1 on the empowerment of competition authorities (also known as “ECN+”) into Italian law. The decree amends the antitrust regulations currently contained in Law no. 287/1990. Key changes relate to (i) the independence safeguards of the Italian Competition Authority’s personnel, (ii) investigation and sanctioning powers as well as the evidentiary system and the access to files, and (iii) cross-border cooperation and assistance in investigation activities between National Competition Authorities.
Capital Markets Implementing the Prospectus Regulation: In early February 2021, the Government finally issued Legislative Decree 17/2021 which adapted existing national legislation (primarily, the Consolidated Financial Act, or TUF) to implement Regulation (EU) 2017/1129 (Prospectus Regulation). The main measures (i) repeal the TUF rules overlapping with the Prospectus Regulation, (ii) maintain the rules concerning public offers of financial products not falling within the scope of the Regulation and (iii) amend the rules on CONSOB’s powers and civil and administrative liability. As the Prospectus Regulation has been directly applicable in Italy since 21 July 2019, this decree was eagerly awaited, especially as CONSOB had already amended its Issuers Regulation with Resolution no. 21016 of 24 July 2019 (although a second consultation has been published to ensure coordination with the latest TUF and EU provisions – for which, see below).
Changes to the Prospectus Regulation: On 16 February 2021, Regulation (EU) 2021/337 was adopted, which amended the Prospectus Regulation to introduce the EU recovery prospectus (Prospetto UE della ripresa). This is a short-form prospectus only available to listed companies (issuers of shares traded on a regulated market or SME growth market). It aims to allow for a rapid recapitalisation of EU companies and to enable issuers to tap into public markets at an early stage in the recovery process. The EU recovery prospectus regime was introduced in the context of the Capital Market Recovery Package. These European measures were implemented to swiftly address the severe economic impact of Covid-19, and will expire by 31 December 2022. In addition, on 26 March 2021, Delegated Regulation (EU) 2021/528 was published. This regulates the content of the exemption document to be published, in place of the prospectus, for offers and listings of securities issued in connection with mergers, demergers and exchange of offer transactions.
Updates to non-financial and diversity information disclosure: Following the introduction of disclosure obligations on non-financial information and diversity policies (so called “DNF”) for public interest entities by Legislative Decree 254/2016 (implementing Directive (EU) 2014/95 on the disclosure of non-financial and diversity information), a CONSOB summary report of 11 May 2021 published the outcomes of a call for evidence on a voluntary DNF regime. CONSOB Resolution no. 21850 of 19 May 2021 introduced parameters for identifying the entities whose DNF will be subjected to control (based on the sample check regime provided by CONSOB Resolution no. 20267 of 18 January 2018).
Transposition of Digitalisation Directive: Legislative decree no. 183 of 8 November 2021 has implemented Directive (EU) 2019/1151 (“Digitalisation Directive”). This amends Directive 2017/1132 (on certain aspects of company law) in relation to the use of digital tools and processes. The directive introduces procedures that streamline company formation and the online registration of branches, lower costs, and shorten timeframes. Under the decree, the digital incorporation procedure will be available to limited liability companies and simplified limited liability companies, but with the option of extending it also to other types of limited liability companies. It also offers company formation templates on portals or websites that can be consulted through the single digital Gateway.
Transposition of Digital Content and Services Directive:
Legislative decree no. 173 of 4 November 2021 has transposed into national law Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and services. The Decree amends some consumer protection provisions currently contained in the Legislative Decree no. 206/2005) (Consumer Protection Code). In particular, it intervenes on provisions related to contracts for digital content (e.g., music and video, e-books, apps and e-games and digital services (e.g., social networks, cloud applications and cloud storage services). The Decree also has relevant data protection implications as it regulates digital contracts where the service is provided in exchange for personal data (instead of money).
Implementation of RED II Directive on renewable energy: Legislative decree no. 199 of 8 November 2021 has transposed into national law Directive (EU) 2001/2018 on the promotion of the use of energy from renewable sources (RED II). The new provisions aim to accelerate energy transition by phasing out fossil fuels in favour of renewable energies and set Italy’s target share of energy from RES in gross final consumption to at least 30% by 2030. The main provisions include: simplifying and stabilising the incentive system; streamlining the authorisation procedures; introducing regulation of the renewable energy communities; evolving the energy system and related infrastructures; completing the liberalisation of retail markets while protecting the most vulnerable customers; and introducing a system of long-term supply of storage capacity with the aim of promoting the development of the investments necessary to implement the National Energy and Climate Plan (PNIEC). Moreover, RED II provided the key features of the new incentive mechanism for renewable energy plants. These include: simplified access to incentives; an auctions-based mechanism for plants over 1 MW; and a five-year horizon period for the scheduling of auctions and relevant quota to be allocated.
Simplification of authorisation procedures in energy sector: Law Decree No. 77/2021 (converted into Law No. 108/2021, the “Semplificazioni Decree”) introduced provisions to narrow the “permitting gap” and boost the development of renewable energy and storage plants, with a particular focus on photovoltaic plants (PV plants). Key focus areas in the renewable energy sector include: (i) simplified authorisation procedures for PV plants; (ii) Environmental Impact Assessment regime – new threshold for PV plants; (iii) implementation of agri-voltaic PV plants; (iv) repowering activities for renewable energy plants – a super-fast track; (v) installation of energy storage systems.
Transposition of EU Directives on internal energy market and risk preparedness in the electricity sector: Legislative decree no. 210 of 8 November 2021 has implemented Directive (EU) 2019/944 on common rules for the internal market for electricity (Electricity Directive). This directive is part of the Clean Energy for all Europeans package which aims to keep the EU competitive when transitioning to clean energy. The measures include: (i) the empowerment and digitalisation of grids, (ii) the transition to smart and electric mobility, (iii) the increase of energy storage and self-consumption and (iv) the implementation of energy communities. In addition, the Government shall adapt national legislation to Regulations (EU) 943/2019 on the internal electricity market and (EU) 941/2019 on risk preparedness in the electricity sector to harmonise the Member States legislation on risks to electricity supply.
State of emergency – Green Pass: With Law Decree no. 105/2021 (converted by Law no. 126/2021), the Government has extended until 31 December 2021 the state of emergency due to Covid-19. As of 15 October 2021, it is mandatory to have the so-called “Green Pass” to access workplaces. Employers, both public and private, must have the appropriate equipment to verify the possession of the green certification, while respecting the protection of personal data. An extension of the state of emergency is expected, as well as the mandatory use of the Green Pass in the workplace.
Ban on dismissals: The scope of the ban on dismissals (blocco dei licenziamenti), introduced by the "Cura Italia" Decree, was gradually reduced during 2021. From 30 June 2021, ordinary rules applied again to employers in the construction and industrial sectors, with the exception of textile fashion companies, for whom the ban was extended until 31 October 2021. For employers that request a short time working program due to Covid-19, the ban extends until 31 December 2021.
Aligning the Italian rules with the Money Market Funds (MMF) Regulation: Legislative Decree 17/2021 aligned the existing Italian rules with the provisions of Regulation (EU) 2017/1131 on MMF. The Regulation introduced common rules to increase the liquidity of MMFs and ensure they have a stable structure as well as a minimum level of daily and weekly liquid assets. It also sets out provisions to ensure that MMFs invest in well-diversified, high-quality assets.
Adoption of the banking package: Legislative decree no. 182 of 8 November 2021 has implemented Directive (EU) 2019/878 (CRD V) and adapted the national legislation to the provisions of Regulation (EU) 2019/876 (CRR II). The changes brought by the decree relate to: regulation of banking groups to implement the new provisions on authorisation and supervision of financial holding companies; regulation of the establishment of intermediate/parent undertakings (IPUs) by groups from third countries operating in the EU; the collaboration between prudential and AML authorities and financial intelligence units; alignment of the rules on acquisition of qualifying holdings in banks and other supervised intermediaries to the guidelines of the EU supervisory authorities; the Bank of Italy’s powers on financial reporting.
Amended rules on bank recovery and resolution: Legislative decree no. 193 of 8 November 2021 has implemented Directive (EU) 2019/879 (BRRD II). This amends Directive (EU) 2014/59/EU as regards the loss-absorbing and recapitalisation capacity of credit institutions and investment firms. The decree amends the Consolidated Banking Act (or TUB) and the TUF to update the rules on bank recovery and resolution, through a redefinition of the Minimum Requirement for own funds and eligible liabilities (MREL). Credit institutions and investment firms are required to hold a sufficient amount of high loss-absorbing liabilities to ensure that minimum levels of regulatory capital can be restored in the event of resolution.
Implementation of Investment Firms Directive: With a legislative decree no. 201 of 5 November 2021, the Government implemented Directive (EU) 2019/2034 on the prudential supervision of investment firms (IFD) and Regulation (EU) 2019/2033 on the prudential requirements of investment firms (Investment Firms Regulation or “IFR”). The new legislation distinguishes investment firms into four sub-categories, each subject to different prudential requirements. It also establishes that class 1 SIMs shall be authorised by the ECB (and no longer by CONSOB) and that they shall be subject to most of the rules applicable to credit institutions. Additional changes concern theholding companies of investment firms and the regime on administrative sanctions.
Cross-border distribution of collective investment undertakings: Legislative decree no. 191 of 5 November 2021 amended the existing rules on cross-border distribution of collective investment undertakings, to transpose Directive (EU) 2019/1160 into Italian law. The new rules intend to facilitate the cross-border distribution of investment funds, by making it cheaper and by reducing the current regulatory obstacles, while at the same time guaranteeing investors protection.
Amended rules on covered bonds: Legislative decree no. 190 of 5 November 2021 which implemented Directive (EU) 2019/2162 on the issuance of covered bonds was approved. It also adapts the national legislation to the provisions of Regulation (EU) 2019/2160, which amends the CRR as regards exposures in the form of covered bonds. Covered bonds are defined as debt securities issued by a credit institution and secured by hedging assets on which bondholders can directly claim as preferred creditors in the event of default of the issuer. As to the scope of the new rules, the directive regulates the structural characteristics of covered bonds, as well as coverage, liquidity and disclosure requirements for issuing banks. The regulation amends Article 129 CRR to introduce a preferential treatment for bondholders in terms of capital requirements, and requires compliance with a minimum level of overcollateralisation.
Urgent measures regarding corporate crisis: Law Decree no. 118 of 24 August 2021, converted into Law no. 147/2021, further postponed to 16 May 2022 the entry into force of Legislative Decree 14/2019 (the so-called “Crisis and Insolvency Code”). It also introduced certain new and innovative turnaround and insolvency tools, such as negotiated settlement of the crisis and simplified composition with creditors for the liquidation of assets. Finally, it made changes to the provisions on debt restructuring agreements under the current Bankruptcy law for what concerns the scheme of the arrangements, the material amendments to the plan and facilitated debt restructuring agreements.
Proposed reform on the extraordinary administration of large insolvent companies: The Parliament is about to approve a law that would mandate the Government to reform the current rules on the extraordinary administration of large insolvent companies. The law intends to reform the current rules to reconcile the needs of creditors, the public’s interest in protecting assets and employment given that the companies, although in a state of insolvency, are of great economic importance due to their size. The two-phase structure of the current procedure would remain unchanged. Further innovations concern: the attribution of competence over the procedure to the specialised business sections at the courts of appeal; the need to regulate the operation of protective measures similar to those provided for the arrangement with creditors; the start of the procedure, providing for a term of 10 days from the filing of the debtor’s application, within which the court - having ascertained the requirements of insolvency, the size of the company and the related number of employees - declares insolvency and orders the commencement of the procedure for admission to extraordinary administration by appointing the delegated judge; the role and requirements of the extraordinary commissioners.
New tax exemptions for dividends and capital gains: With Law Decree no. 178 of 30 December 2020 (2021 Budget Law), the Parliament approved favourable tax provisions applicable to foreign undertakings for collective investment established in the EU and in whitelisted EEA countries deriving Italian-source dividends and capital gains on shares. Consequently, an EU/EEA UCITS or AIF will no longer be subject to: (i) the 26% withholding tax on dividends (and deemed dividends possibly realised, for instance, upon redemption / liquidation) paid by Italian resident companies on shares; (ii) the 26% substitute tax on capital gains realised from the disposals of “qualified shareholdings”. Qualified shareholding is a shareholding, other than savings shares, that represents more than 20% of the voting rights at the shareholders’ meeting (2% in the case of listed companies) or 25% of the net equity (5% in the case of listed companies) of the relevant issuer. Capital gains realised through the disposals of shareholdings other than Qualified Shareholdings (Portfolio Shareholdings) are not covered by these new tax measures as they already benefit from a favourable tax regime. The new tax measures came into force on 1 January 2021 and are not retroactive.
New favourable tax measures for hotels: Law Decree no. 152 of 6 November 2021 (the so-called “Bonus Hotel”) introduced measures to “improve the quality of the touristic offer”. The Bonus Hotel is available to the entities listed in paragraph 4 of Decree 152/2021. These include hotels and similar enterprises. In brief, the Bonus Hotel provides for an 80% tax credit on expenses incurred for antiseismic upgrading, energy efficiency, removal of architectural barriers, digitalisation and related expenses incurred up to 31 December 2024. It also introduces a State grant up to a maximum amount of EUR 40,000, which can also be used independently of the tax credit. The tax credit may be: (a) used exclusively to offset tax liabilities; and/or (b) transferred to third parties, including banks and financial intermediaries. To be entitled to the Bonus Hotel, a specific application must be submitted.
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